Volkswagen Adjusts Forecast Amid US Tariffs and E-Auto Challenges

Volkswagen has lowered its financial targets for 2021, citing US tariffs, internal restructuring costs, and growing sales of less profitable electric vehicles as reasons. The company now expects an operating profit margin of up to 4%, down from a previous target of at least 5.5%. Volkswagen faces challenges in three key markets: the US, where Trump's tariffs threaten to disrupt the Audi and Porsche business model; Europe, where demand is sluggish and production costs are high; and China, where the company is losing market share to domestic brands. Despite these challenges, Volkswagen is focusing on partnerships to reposition itself and has recently announced collaborations with Rivian Automotive in the US and Xpeng in China.

Volkswagen AG has revised its financial targets for 2021, reflecting the impact of U.S. tariffs, internal restructuring costs, and the growing sales of less profitable electric vehicles. The German automaker now expects an operating profit margin of up to 4%, down from a previous target of at least 5.5% [1].

The company cited several challenges, including political uncertainty, trade restrictions, volatile markets, and tighter emissions rules. Volkswagen is also facing significant headwinds in key markets. In the U.S., President Trump's tariffs threaten to disrupt the Audi and Porsche business models. In Europe, demand is sluggish, and production costs are high. In China, the company is losing market share to domestic brands [1].

To mitigate these challenges, Volkswagen is focusing on partnerships to reposition itself. The company has recently announced collaborations with Rivian Automotive in the U.S. and Xpeng in China. These partnerships aim to strengthen Volkswagen's position in the electric vehicle market and enhance its technological capabilities [1].

The revised financial guidance includes a projection of sales growth in line with last year, with a group operating return on sales of between 4.0% and 5.0%. Net cash flow at its automotive division is seen at between 1 billion and 3 billion euros ($1.17 billion-$3.52 billion), and net liquidity in the division is projected to be between 31 billion and 33 billion euros [1].

Despite the challenges, Volkswagen remains committed to its strategic objectives. The company's revised outlook assumes U.S. tariffs will either remain at 27.5% or fall to 10%, reflecting the ongoing negotiations between the EU and the Trump administration [1].

References:
[1] https://www.marketscreener.com/news/volkswagen-cuts-guidance-as-tariffs-hit-earnings-ce7c5fdadf8bf622
[2] https://www.investing.com/news/earnings/volkswagen-cuts-outlook-after-h1-profit-drops-33-cash-flow-turns-negative-4152467